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Need more space for my family in a better neighborhood, but i don't have much equity on my first hom

I have a condo in worcester massachusetts that i purchased almost 3 years ago for 222k. I put nearly nothing down. The remaining principle is about 209k. I am out of the country for most of the year but i have a friend of mine live there and take care of it for me. He also pays half of the rent. Since then I have gotten married and had my first child. Thinking into the future i do not really want to raise my son in this particular part of worcester. I have seen some nicer bigger homes in a near by neighborhood that got for 325k or so. We have about 60k saved right now and hope to have around 80-100k by this time next year. My daughter is going to be 2 this summer. I am looking for some advice to get into this new home as soon as possible. I also would like to know what are my best options and what I should do with my current condo. I know this is not the best market for selling. I am very stressed about this situation and would appreciate any help I can get. Thank you ! P.S. I already pay about 2700 in bills each month not sure if that is relevant or not but wanted to throw that out there . 
  • November 09 2010 - Worcester
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Answers (6)

Well, the most obvious (and likely)scenarios are to keep the condo and rent it, or put the condo on the market. As you've already mentioned, now is not an ideal time to sell ------ if you look only at the numbers. For example, let's assume that you paid $100 for the condo 3 years ago. Let's assume that condo is now valued at/on the market for $85. Let' assume you do sell it for $100. Your net loss would be 15%. Now, that same depreciation applies to the home your considering. For example, let's say the home you're looking at was priced at $200 3 years ago. Well, its likely that the home has also depreciated at the same rate (or, perhaps a bit lower rate) than the condo, with that home now offered at $170.

At the end of the day, unless you buying or selling in one market and moving into another market that is not experiencing the same set of economic (or other) influences, its very close to a wash .....

Now, are you risk friendly ? Risk averse? You may simply want to hold on to and rent the condo. May sure you've got a good accountant to help with expenses, etc. as that will help over the years ....

Hope this helps a bit ....

  • November 09 2010
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I agree with Mark, if you are buying and selling in the same market it all tends to balance out. You may want to talk to a lender as well and find out what you can qualify for a mortgage in both scenarios...selling the condo or keeping it as an investment property. Good luck!
  • November 09 2010
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Find out what your condo unit is worth right now, contact a local agent to get recent sales in the complex.  Talk to a lender to see if you were to buy a single family home and keep the condo, is there a requirement that you have a certain amount of equity in the condo to keep it.  I have heard that if a buyer wants to keep their current property and buy another that the current property has to have 25% equity.  Look at the total monthly expenses of the condo and see how much can be covered with rent. 
I am assuming that you are going to be surprised how much your unit is currently worth and even if you were to sell it you would be short even with your savings.  This is a tough market but it you can keep the condo as a rental and buy your next home do it.  Best of Luck

Eric
  • November 09 2010
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fatherof1: There's alot of variables in your scenario, so Eric's advice to check with a lender is a good one. Your situation is going to take some extra planning.

In general... you'll have some reserve requirements to meet in addition to the normal qualifying (scores, debt vs income, etc)... if you turn your condo into a rental. 6 months of payments for both condo & new home.

Best of luck... Clark
  • November 09 2010
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Hello Father of 1,

Take comfort in knowing that you are not alone in your situation!  Most of us need to sell our current homes, or at least arrange to rent them out, before we buy a new home.  Both scenarious are definitely possible to do this in today's market....especially in Worcester County.

My advice is to sit down with a Real Estate Professional and a Mortgage Advisor.  Between the three, you will have a snapshot of YOUR situation and can go from there!

It would be my pleasure to help you get started!  I invite you to call or email me any time.

Good luck,

Judy Boyle
RE/MAX Signature Properties
[contact info removed by moderator]
  • November 09 2010
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Like others have written, you would be wise to consult both a real estate and mortgage professional.  There are several lending guideline variables to consider in regard to holding the condo vs. selling.  Perhaps your friend would have interest to purchase?  Happy to offer specific guidance.
  • November 10 2010
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